You may have heard me going on recently about the strength of the Germany economy in the midst of a host of weak services-oriented European economies (see A Hitchcockian nightmare: Europe falling off a cliff). And Germany's dynamic automobile industry epitomizes this.
I tend to think of BMW and Daimler as being the strongest German automotive brands.This is partly because they are towards the top end of the luxury spectrum and partly because – being positioned towards the luxury end – they have been pioneers of increasing electronic content within automobiles. The participation of BMW and Mercedes (Daimler's automobile brand) in Formula 1, grand prix racing has probably also helped.
However, a news item from last week helps remind us that Volkswagen (VW) is in many ways a bigger success story in both Germany's and the world's automotive sector. VW announced last week that the deal has been agreed for it to acquire the 50.1 percent stake it doesn’t already own in German sports car maker Porsche. It's a bit like the story of the hare and the tortoise.
VW – of people's car, beetle and microbus fame – has always been much more proletarian that any of those other German brands, but it also wholly owns brands such as Audi, as well as SEAT and Skoda. Now VW is set to pay 4.4 billion euro (about $5.6 billion) to wrap up Porsche in a move that will help cement its role as one of the big three carmakers alongside General Motors and Toyota.
It is notable that there is one of the top three from the United States, one from Europe and one from Japan. The likes of BMW and Daimler come much further down the rankings in terms of volume of cars supplied each year.
And in many ways it is those volumes that are important. Electronics is in all vehicles these days. But while Mercedes and BMW may be fine tweaking the smart-card protected and personalized heated passenger sear, Volkswagen has been taking the essentials of electronic utlility and safety and applying them to convenient transport across the world including South America and China. And Volkswagen are reportedly very big in Brazil and China.
Of course, it is arguable as to how green is the proliferation of automobile transport around the world but we who enjoy the convenience of personal transport are in no moral position to dictate that others should not also have it. And Volkswagen is providing that capability with global success, in a way that rivals the success of Airbus in aerospace. And the likes of Airbus, Volkswagen, Audi, Mercedes-Benz, BMW and the rest all provide opportunities for European sales of electronics and semiconductors.
Europe needs more success stories like Volkswagen if it is to crawl out of the wreckage of its own economic car crash.
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A Hitchcockian nightmare: Europe falling off a cliff